Iran trader held over Sh188m tax bill

The Kenya Revenue Authority (KRA) has detained an Iranian businessman’s passport to stop him from leaving the country before his company has settled a Sh188 million tax claim.

Seyed Hassan Dashti Khavidaki is being pursued over the Sh188 million that Farab International FZE Limited allegedly failed to pay after it built a private power plant in Bungoma.

Mr Khavidaki's passport was confiscated on November 4 upon arrival at the Jomo Kenyatta International Airport.

He has filed a suit for orders compelling the taxman to return his passport.

“The honourable court be pleased to issue an order directing the 1st respondent to release the applicant’s passport…unlawfully held by the 1st respondent and its officials pending the hearing and determination of this application,” Mr Khavidaki, the country director of Farab International FZE, says in his suit papers.

The businessman says the confiscation of his passport has confined him to his hotel and that he is unable to move without the only identification document he had.

The KRA has in recent months stepped up its bid to seal revenue leakages and pursue tax cheats to increase its collection.

The taxman said last week it was examining Sh22.56 billion worth of outstanding input value added tax (VAT) claims made in the past 18 months for possible fraud after it detected inconsistencies between purchase and sales invoices submitted by traders.

Mr Khavidaki reckons he is a mere agent of the target firm and not a shareholder and that the KRA is only using him as bait to get to the shareholders who are outside the country.

Court documents show that the KRA on October 23 wrote to the Directorate of Immigration directing it to block Mr Khavidaki from leaving Kenya.

The KRA says Farab directors are all Iranian nationals and that the company has no tangible assets in Kenya that can be used to secure the taxes.

The taxman wrote to Farab on September 28 asking it to settle Sh188.3 million outstanding VAT for the years 2015 to 2017.

The amount is made of Sh125 million VAT arrears, Sh25 million accrued penalties and Sh38 million interest.

Tax bills

Farab incurred the tax bills in a Sh782 million contract it undertook in Bungoma over the three years under review.

The firm, which is based in the United Arab Emirates, was contracted by Terem Regen SHPP Limited to develop Terem 5MW Hydro-power station on Kuywa River.

Terem Regen is a special purpose vehicle that produces power for onward sale to the government.

The KRA informed Farab that it was in the process of analysing the amount due in regard to income tax.

The firm through a tax consultant objected to the demand arguing that when it signed the contract agreement it understood that power projects are exempted from taxation as per legal notice that sought to attract investment and lower the cost of energy.

The firm says due to this understanding, it did not include the tax cost in its pricing.